Kerala FM moots Islamic bank idea

images2THIRUVANANTHAPURAM: In the backdrop of a growth crunch in the Gulf countries that could lead to large-scale job losses, Kerala is mulling the idea
of establishing a bank that would run according to Islamic banking principles, with the idea of funding welfare programmes for returnee non-resident Keralites.

State finance minister T M Thomas Isaac said the government would consider the option of setting up a bank that runs on Islamic banking principles, in which depositors would get a share of profits instead of interest.

The state government, he said, hoped to get funds from such an institution to take up welfare measures aimed at expatriate Keralites who have returned following job losses abroad.

The state budget had proposed to set aside Rs 100 crore to be given to NRIs in low-interest loans, and the Kerala Financial Corporation has been entrusted with the task of managing funds aimed at rehabilitation of non-resident Keralites who have returned.

source : com

Sharjah Islamic Bank’s Profits Slip 21.9%

imagesDUBAI – Sharjah Islamic BankSharjah Islamic Bank, or SIBSIB, on Saturday reported a 21.91 per cent fall in its net profit for the first half of the current year, compared with the same period last year. The Shariah-compliant bank, without mentioning any reason for the decline in earnings, announced a net profit of Dh151.7 million for the first six months of the year, compared with Dh191.8, the bank reported for the first half of 2008. Net profit before distribution to depositors reached Dh309.3 million compared to Dh309.7 million for the same period last year, the bank said in a statement. The balance sheet grew since December 2008 with total assets reaching Dh16.2 billion while customer deposits reached Dh9.8 billion since December 31, 2008. The bank reported net customer receivables at Dh10 billion compared with Dh10.2 million as on December last year. “Islamic banking is less exposed to risks like the global financial crisis as it is not based on predictions but on profit or loss sharing,” a Sharjah Islamic BankSharjah Islamic Bank official said at a forum in Dhaka, Bangladesh, on July 17. Islamic banking system is not based on predictions, which gives it the advantage to less external shocks like the recent financial meltdown,” Ipahim Iqbal Karmally, the head of trade finance for the SIBSIB, told an online newspaper,, in Dhaka
source : qmp


The Saudi Basic Industries Corporation (SABIC) is pleased to announce that it has obtained the Saudi Capital Market Authority approvals and has begun to issue its second Shariah Compliant Sukuk on July 11, 2007. The Sukuk issuance will be available to the investors in the GCC. The Sukuk will be issued in denominations of SAR 10,000 and will be subject to a minimum holding of SAR 50,000.

SABIC has mandated HSBC Saudi Arabia Limited and Riyad Bank as Lead Managers and Book runners for the Sukuk issuance, which features a Sukuk structure approved by SABB Amanah’s Shariah Supervisory Committee. The investor presentation period will continue until July 25, 2007.

UK Minister Reiterates Government’s Commitment to Islamic Finance

The UK Government remains committed to Islamic finance and will continue to work with the other authorities and with industry to establish and maintain the UK as a global gateway to Islamic finance, stressed Sarah McCarthy-Fry, Exchequer Secretary to the UK Treasury in London on Thursday.

Mrs. McCarthy-Fry, who is the minister responsible for leading Islamic finance policy at the UK Treasury, was giving the keynote address at the inaugural session of the 2009 London Sukuk Summit held on 2nd-3rd July at the Radisson Hotel in London and organized by ICG Events. The Summit, the third annual one to date organized under the theme ”Innovating for the Future: The Next Generation of Post Credit Crunch Sukuk Structures/Preparing for the Next Wave of ICM Offerings’, once again attracted a good attendance from a wide variety of regulators and market players.

The Summit was preceded by a Sukuk Masterclass titled ‘Understanding Sukuk – Issues, Structuring, Innovation’ which was held at the offices of City law firm, Ashurst LLP and which once again was well attended. Similarly, the 2009 London Sukuk Summit Islamic Finance Awards was held on the evening of 2nd July at a Gala Dinner and which recognized the achievements and progress of institutions and individuals in the Islamic finance industry.

The Exchequer Secretary, Sarah McCarthy-Fry, speaking in the presence of Professor Rifaat Abdel Karim, Secretary- General of the Islamic Financial Services Board (IFSB) and Mohammed Tariq, Head of Treasury at the Islamic Development Bank (IDB)Islamic Development Bank (IDB), maintained that in these difficult times for international financial markets, “new opportunities for growth and development become increasingly important. The Islamic finance market presents huge long-term opportunities for London and for the UK….Islamic finance is an opportunity that we want to see realized for the benefit of pitain as a whole – strengthening London’s position as – not just one of the world’s leading financial centres – but as the world centre.”

Indeed the Exchequer Secretary commended the London Sukuk Summit initiative stressing that “events like these are crucially important. They forge networks where conversations can be continued and where relationships and business can be built.”

Perhaps equally important is the reassurance from Mrs. McCarthy-Fry that the decision not to issue a sovereign Sukuk by the UK Treasury at this time, “in no way reflects a diminished Government commitment to Islamic finance in the UK. I hope that other progress, including the measures announced in the recent Finance Bill (2009), will pave the way for the Islamic finance industry to grow, and that corporate Sukuk products will thrive as alternative source of funding for UK and overseas firms.”

Bankers in the UK and those from apoad attending the Summit were encouraged by the minister’s remarks and by the fact that the UK Treasury is soon publishing details of a consultation on the measures to facilitate corporate Sukuk issuances out of the UK.

source : qatarmp

Islamic Finance – Outlook and Reality; Seminar in Bali

Bali to Host International Seminar on Islamic Finance September 26-30, 2009.

According to the organizers, the goal of the Bali meeting is to raise awareness of the diverse global interests and wide membership base of the Islamic Finance community worldwide. The Bali gathering will also encourage wider participation in an international dialogue and exchange of information on Islamic finance and strengthen financial systems at both the national and global level.

The focus of the Bali presentations by acknowledged leaders in their respective fields will be “Islamic Finance – Outlook and Reality.”

Findings, conclusions and action plans resulting from the seminar – and similar meetings being held across the region – are hoped to directly contribute to a stronger financial global community. The further hope is that each finance industry professional coming to the Bali meetings will contribute in shaping the future outlook of Islamic finance.

Those involved in Islamic finance from within both the public and private sector are urged to add their names to the growing roster of participants who will travel to Bali seeking ways to advance the Islamic finance industry.

Some of the topics that will be covered in Bali include:

• Shariah and legal frame work for Islamic financial institutions.

• Financial accounting aspects of Islamic Institutions.

• The role of the Shariah committees in the development of the Finance Industry.

• Marketing strategies for Islamic Products and services.

• Recent development in the regulatory and supervision issues for Islamic Finance institutions.

• Growth and development of the Islamic Finance Industry.

• Financial crisis impacts on the Islamic Financial institutions.

Among the distinguished international speakers attending the in Bali are:

• Sheikh Abdullah Bin Suleiman Al-Manea – Saudi Arabia

• Dr. Muhammad al-Bashir Muhammad al-Amine – The Kingdom of Bahrain

• Dr. Mohamad Nedal Al Chaar – General Secretary , AAOIFI

• Dr. Farid Kourtel – Algeria

• Mudassir Amray, head of Citigroup Islamic Finance for Asia pacific, Singapore

• Bernardo Vizcaíno – Singapore

• Abdul Rahim Kamil Wan Mohamed Ali – Senior Consultant Malaysia Securities

The Bali seminar is arranged by a commission comprised of :

• Dr. Sunil Kamar – UAE, Dubai

• Ayad Al-Mutairi – Saudi Arabia

• Azmat Rafique – Qatar

• Lindsey Rogerson – United Kingdom

The organizer promise a program filled with stimulating discussions, informed guidance and up-to-date solutions to financial issues facing the Islamic finance industry as well as strategies for contending with the current world financial crisis, while providing an outstanding networking opportunity with the movers and shakers in modern-day Islamic finance.

source : bali news

Scholars Stop in Istanbul to Analyze Islamic Finance

Islamic Finance News, a global provider of information and news regarding the field of Shariah-compliant financing, will be holding a “roadshow” today in İstanbul, reported TodaysZaman.

With Islamic finance practices sprouting in various parts of the world, particularly after the onset of the ongoing global financial crisis, the level of competition is rising and participation banks in Turkey have to step up their pace to meet customers’ needs, a formidable task as Islamic financial institutions are becoming adept at innovating market-creating products and providing quality delivery services. To top it off, players from other countries are moving into Turkey, either opening their own firms or buying into existing Turkish entities.

As such, the Islamic Finance news Roadshow 2009 is being held at a perfect time for Turkey. Its objective is to help Islamic financiers get new perspectives and ideas on how to expand their business, strengthen their platforms and seek new or different ways of undertaking their activities.

The emerging Islamic insurance or takaful industry could grow at 30-40 percent annually in the next three to five years as more people switch from conventional to Islamic insurance, a senior executive said. “I think the takaful industry is in a growth mood for two reasons,” Noor Takaful’s managing director Ahmed al-Janahi told the Reuters Islamic Banking and Finance Summit in Dubai on Tuesday, as quoted by Reuters. “Every day, people need to insure and there is a departure from conventional insurance. A lot of people are switching,” he said. “Growth is expected at 30-40 percent going forward as people in Muslim countries are switching from conventional to takaful.” Janahi said more people were switching to takaful as insurance product ranges were becoming more competitive.

Turkey, being touted as a vital link between East and West not only in the geographical sense but also economically and politically, is also of special interest to those who observe the principles of Islamic finance. It is only to be expected, therefore, to find financial institutions that bank according to Islamic principles doing well in Turkey. In particular, these participation banks are becoming a significant conduit for funds from the Middle East seeking better returns in Europe through Shariah-compliant financial arrangements.

Islamic finance is no longer only a form of mutual assistance among Muslims; rather, it is being readily embraced by much of the rest of the world. In the midst of so many opportunities, time is of the essence, be it to venture into Islamic finance for the first time or to consolidate and increase one’s market share in this sector. The roadshow is designed to be of assistance to those in either of these circumstances.

D-8 Secretary General, Dipo Alam, says that the D-8 member countries should focus more on developments in this sector, such as Syari’ah Banking system, and Islamic Bonds, since they have growned to be a powerful tool in the financial world that even Western, non-Islamic banks are starting to eye for a share on this financial system and plans to assign London as the center for Syari’ah Banks, and Islamic Bonds.

A particularly useful feature of the roadshow is opportunity for interaction and discussion. Not only is the audience invited to ask questions of the panelists on their discussions at each session, there are also networking sessions where business contacts can be established. Over 150 key market participants have already registered to attend the event. Organized by the REDmoney Group, the forums will span Asia, the Middle East, Europe and Africa. Upcoming roadshows will be held in the UK (Sept. 16), Japan (Oct. 6), Brunei (Oct. 20), India (Nov. 3) and Pakistan (Nov. 5).

The roadshow will begin with an overview of what’s happening in Turkey from the perspective of Islamic financial practice, especially in the context of the region and beyond. The discussions will then move on to developments in particular aspects of Islamic finance, delving into issues such as regulations and ratings. The session on making the business environment in Turkey and the region conducive to the development of Islamic financial products is another highlight of the roadshow. Islamic Finance News’ objective is to facilitate the continued nurturing of the industry. It provides a strong and steady stream of news and views, in addition to inviting participants to interact and share experiences and knowledge.

“We should be rolling up our sleeves, and start to work on this issue to keep pace with the world”, Dipo Alam says. D-8 has an approximately 900 million population with large moslem majority, and is supposed to be also a major actor in this Islamic financial system.
source : D8

Islamic Finance in Asia

A growing river of money seeks investment consistent with Islamic religious principles

Three races are now underway on the topic of Islamic Finance and Asia.

Firstly, there is a race among financial markets to get their share of a fast-growing (15 percent or more a year) business.

Secondly, just as important, there is a race to see how much business Islamic finance products can attract against competition from conventional forms particularly in Muslim-majority countries.

The third race is between varying interpretations of shariah law to determine how far down the road of exotic products — hedge funds, options and derivatives — Islamic finance can honorably go while adhering to the spirit of the law. The Gulf countries tend to follow stricter interpretations than Malaysia. The region is often referred to as the GCC states, the six members of the Gulf Cooperation Council – Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain, Oman.

A recent Euromoney Seminar on Islamic Finance in Kuala Lumpur provided a good background in all these races – but also drew attention to the fact that Islamic Finance is still something of a specialized sideshow attracting its own players to discussion but remaining outside the ken of conventional finance.

The most important hub of Islamic finance is the Gulf, partly because it has a stronger history of links between religion and finance and partly because its huge capital surpluses have created a demand by its financial intermediaries for Islamic products in other jurisdictions, not necessarily Islamic ones. Overall there are estimated to about US$70 billion worth of sukuk (the main form of traded Islamic security) outstanding though only about 25 percent of that is listed and trading is very modest.

Dubai is the main centre for listing and trading followed by London. However, Malaysia is now probably the fastest-expanding center, having moved from purely domestic listings to international ones, with the government raising US$600 million with a sovereign sukuk and allowing foreign Islamic finance institutions easy access to the domestic market, which encouraged the entry of GCC players and created much cross-fertilization.

It is the sheer rate of growth of Islamic finance and the possibility that its share of global finance will continue to increase rapidly which is pushing Tokyo, Singapore and Hong Kong to try to grab a piece of the action. At the very least they need to be able to offer shariah-compliant products to rich GCC investors, and perhaps even sell the concept of sukuk to local, non-Muslim investors.

However all this is easier said than done. Of the three Singapore clearly has the best opportunity. Its proximity to the Malaysian market and to Indonesia, its links (partly due to oil trading) with the GCC and even its local Muslim population are helpful. It has changed its banking and tax laws to ensure that Islamic products are treated in the same way as conventional debt securities (even though they supposed to be different in principle) and also put them under the same regulator. The Monetary Authority of Singapore is able to provide clarity on tax and regulatory matters for Islamic asset management.

Singapore has attracted more Middle East banks and its large REIT market is also attractive to Islamic investors who look for regular returns from real assets. Even so, Malaysia is likely to lead the region as originator of Islamic products.

Next is Tokyo. Even this seemingly ever-parochial financial centre has now come up with action by its Financial Services Agency to accommodate Islamic finance institutions, in particular by changing firewall regulations to allow financial institutions to engage in asset trading (the essence of shariah-compliant finance) through subsidiaries.

Japan, which has long been behind the Asian Bond Market Initiative – designed to encourage the issue and cross border trading of local currency bond issues – now aims to bring sukuk bonds into this framework. The Japan Bank for International Cooperation is looking to do con-financing involving Islamic and conventional financing tranches. And Islamic-compliant equity funds focused on energy and environmental issues are being aimed at GCC investors.

Well behind in the race is Hong Kong, which has only very recently appeared to recognize the existence of Islamic finance and the need to make special arrangements for it. It is making a few attempts at a quick start, but these largely come from a government which seems ill at ease with Islamic issues and is simply desperate to be seen to be doing something to boost the territory’s international trading role after years of ignoring anything that was not China-related. Its Airport Authority has suggested it may make a sukuk issue and a tiny Islamic Index Fund which tracks the Dow Jones China Islamic Index, comprised of mainland and Hong Kong companies deemed to be shariah-compliant. Such vehicles can doubtless attract some smaller investors but the larger ones can pick and choose between individual companies on the compliant list.

Hong Kong has yet to get to grips with a fundamental tax problem – the city taxes profits arising locally but not interest – as well as various regulatory issues if its is to become an originator of sukuk issues, or even a trading location. It may also need to look at how, if at all, it will vet shariah compliance. Will it set up a board of shariah experts, or just leave that to issuers? For sure there is potential GCC and other Muslim demand for shariah-compliant investments in China and elsewhere in East Asia. But that may be more easily filled with equity investments. Shariah-compliant equities are easy – almost anything qualifies which does not profit from alcohol, gambling, entertainment, pork or usury or have financial ratios showing over-reliance on debt funding.

For sure, GCC countries, already over-stocked with North American and European assets, are increasingly looking to fast-growing Asia and to currencies which seem likely to appreciate. However, with or without sukuk, this is easier said than done given that most of these countries have their own foreign surpluses and high domestic savings rates. The big GCC investors’ preferences anyway have been for big equity purchases.

The next issue is whether there is much interest among non-Muslims in Asia in Islamic finance products. Promoters say that sukuk financing provides profit sharing opportunities unavailable in debt finance. They note too that so far at least no Islamic finance institutions have been badly hurt by the global credit crisis because they do not engage in the leverage, hedging and derivatives trading which has proved so costly to western banks. Sukuk products, they say, deserve some place in a portfolio and as secondary trading develops that will become more accepted. Likewise takaful – the Islamic version of insurance based on mutual principles and profit sharing and will become a more significant buyer of shariah-compliant assets.

However, working against these aspirations are a number of factors. Firstly, that the sukuk concept is little understood outside relatively small circle both domestically and internationally. Sukuk itself comes in different forms depending on type and duration of transactions – murabaha, mudaraba, musharaka and ijara. Much public education of non-Muslims (indeed of most Muslims as well) will be needed before they are going to be prepared to buy in a major way.

Disputes about shariah compliance are a barrier to trading. (Some Gulf institutions have declared that a majority of Malaysian issues are not, by their standards, compliant and thus cannot be included in portfolios. Kuwait Finance House had to get special treatment from Malaysia’s Bank Negara to conform to Kuwaiti interpretations.)

Big arguments are also currently raging about whether it is possible to create Islamic products which mirror the derivative products of conventional finance. This in turn reflects a wider debate over whether shariah compliance is simply an exercise in legal manipulation in interpreting the words of the Koran to create Islamic equivalents of conventional products, or whether it is a key part of a very different economic philosophy and thus its promoters should be emphasizing its differences, not trying to mirror systems based on usury and gambling.

The philosophy, indeed theology, behind Islamic finance may also be alien to many Asian investors who like to gamble and hope that some luck will make them rich quickly. Islamic finance abhors gambling and views return on investment as something to be shared. There is as yet also a lack of common auditing and regulatory standards for Islamic products. The various markets are edging towards standardization but it is a slow process.

How long the Islamic finance growth momentum can continue will depend on two principle factors. First is the duration and scale of the surpluses of the GCC countries (and Malaysia) which have been Islamic fnance’s mainspring. That is largely an issue of energy prices. So long as oil holds above about $75, surpluses will continue to be so big that GCC countries will continue to grow their financial muscle and use it to promote shariah-compliant products.

But either way it’s a very un-Islamic gamble to bet on either oil being for long at $150 or falling to $50. Any early collapse of the oil price could indeed create trouble for supposedly conservative Islamic financial institutions in the GCC in particular. Huge inflows of money have had to be invested—much of is directly or indirectly in very ambitious construction projects as in Dubai and Qatar which could prove investment black holes when the price pendulum swings.

The other issue is whether the populous Islamic states will show more enthusiasm for Islamic finance. Indonesia is to issue sukuks to attract GCC capital but has only very recently changed laws to accommodate Islamic instruments in its domestic markets. Pakistan’s history of Islamic finance goes back 20 years but has been scarred by scandals and poor regulation so only now is it again beginning to gain some local traction. In Bangladesh it is virtually non-existent.

Despite Islamic finance’s claims to be more socially responsible than conventional finance, there is no Islamic equivalent of the Grameen Bank. Indeed promoters of Islamic finance themselves admit that at present it is appealing more to a few very rich investors (as in the GCC) than to the average man in the mosque.

However, if Islamic banking can take root among the masses in fast-developing parts of the Islamic world it must surely have a bigger global future. At a time when most of the rest of the world is headed toward zero population growth, the Islamic world mostly continues to show higher than average birth rates. Demography could be the ultimate determinant of Islamic hopes, but first the ummah (Muslim community at large) needs to be convinced that the system is more beneficial in this world as well as the next.

by Philip Bowring
source : asiasentinel